A Shipping Tax?

I’ve really neglected blogging about Copenhagen, in part because I’m eager for the dust to settle before engaging in any serious analysis. My gut instinct is that the conference is a sideshow that will do little more than provide a temporary boon to the economy of Copenhagen, but I could be wrong. Check out this short post from Brad Plumer of The New Republic on calls for a tax on “bunker fuel,” drawing on an article in the Wall Street Journal.

Much like airlines, the shipping industry was exempt from the original Kyoto Protocol, but since shipping now accounts for 3 percent to 5 percent of the world’s carbon emissions, that won’t last.

Major shipping lines are already announcing plans to move away from bunker fuel. Rod Adams, one of my favorite bloggers, has written extensively on the potential for small nuclear reactors to power merchant ships.

A 15 MW ship propulsion unit with a 12 year fuel supply might cost $75 to $150 million. It would replace a 15 MW diesel engine costing $40 million, and burning bunker fuel oil costing approximately $15,000 to $20,000 per day at today’s prices. After 12 years of operating at a 67% capacity factor, that large diesel engine would consume approximately $75-$100 million in fuel oil at today’s prices. The cost of the nuclear fuel would be known at the time that the engine is purchased, while the cost of bunker fuel during the next 12 years is anyone’s guess. With well-understood design techniques, replacing the nuclear fuel after 12 years would be a 30-60 day process. The new fuel load would cost about $7 million.

It sounds like a fairly attractive proposition, with or without a tax on bunker fuel.

One can imagine a tax on bunker fuel — effectively a tax on shipping — to draw support from many corners in the United States, from environmentalists to protectionists concerned with protecting domestic manufacturers. A sufficiently high tax could conceivably tilt some production from China to Mexico or U.S.-based plants, though I imagine that’s not what the negotiators have in mind at the moment. Chances are, however, that its consequences will be very limited. 

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute Policy Fellow. He is a contributing editor at The Atlantic and National Affairs, a member of the ...

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